The Industrial Organization (that was also called Industrial Economy, in Great Britain and Europe) is not recent, where the central focuses of this study are as follows: (1) competition, as the engine of most modern markets, and (2) the power of monopolies that interfere with the good results of competition (De Jong and Shepherd 2007). The Industrial Organization also focuses on the study of public policies, where the first studies analyzed the governmental policies, in order to prevent the existence of monopolies, to eliminate, or at least restrict, the effects of the existing monopolies. The public policies studies mainly include as follows: antitrust policies, in order to prevent or reduce the power of monopoly; regulation, so as to contain the natural monopolies; deregulation, which removes restrictions, hoping that competition will grow, and the creation of estates that seek to support the public interest when competition does not work.

However, a growing research area, within the Industrial Organization, is iden­tifying the industrial concentration level, where one seeks understanding the rela­tionship between the concentration level and this industry’s price/profitability ratio, where much evidence point to a positive relationship between market con­centration and the sector’s profitability (Peltzman 1977). The basic assumption for this purpose is that high concentration enables collusion and, as a consequence, the manipulation of market prices.

Peltzman (1977) said that the relationship between the market structure and productions costs is long known, where a technological breakthrough in a not con­centrated industry can produce a natural monopoly, since there will be an increase of the operational efficiency through time, generating competitive advantages for a specific organization. On the other hand, according to the author, the pro­cess through which old technology becomes economically obsolete also implies a reduction (or at least no increase) of the offered goods. Whatever force is operat­ing this system, it is crucial to understand what the concentration level is, so as to control the excessive power of some firms within its industry.

Industrial structure and industrial concentration issues have concerned econo­mists and politicians for at least a century (Jacquemin and Slade 1986), while the industrial concentration level is tightly connected to the margins firms keep in the market, since competitiveness drops according to the increase of concentration level, creating opportunities for firms to price in a differentiated manner. The mar­ket concentration analysis, on the other hand, of a specific industry stems from the idea of how it is distributed in terms of production and participation of their firms, in a determined market. In this context, Bain and Qualls (1968) define industrial concentration according to property, considering the control of a great proportion of aggregates of economic resources or activities, by a small companies’ proportion.

George and Joll (1983) states that the industrial concentration regards the size distribution of firms that sell a specific product, with a significant dimension of the market structure, for having an important role regarding a company’s behavior and performance. Besides, the number and size distribution of these firms influence the expectations regarding the competitors’ behavior. In this context, Possas (1985) comments that the industrial concentration is closely linked to the internal profit accumulation and corporate technical progress.

According to Bain and Qualls (1968), the market structure regards the organiza­tional features that determine the relationships with the agents, being an important part of the competitive environment of firms, in order to influence the competitors’ pattern. For the author, this means that the market structure features have a strategic influence on the nature of competition and on determining prices in the market.